Brexit & UK semiconductor industry, trade with France & unregulated BNPL products

Brexit and UK semiconductor industry

On 9th August 2022, in an article entitled “UK urged to come up with chip strategy”, The Times reported on a call by the US semiconductor company, Intel, to the UK Government to lay out a strategy for the semiconductor industry in the UK post-Brexit and not to miss out on inward investment into the sector. The article, by Times technology business editor Katie Prescott, reported that Intel is spending €33 billion in mainland Europe on semiconductor research and manufacturing, with support from the EU, but has no such plans for the UK.

The article says that the EU, under its Chips Act announced in February 2022, has earmarked Euro €45 billion towards the aim of making 20 per cent of the world’s microchips in the EU by 2030 (up from 10% in 2022). Similarly, according to the article, the US is spending more than US $50 billion as part of its Chips and Science Act, passed in July 2022, to encourage global manufacturing to invest in the US.

According to the article, the UK is conducting two reviews into its semiconductor sector, which is crucial to the functioning of electronics and infrastructure, but has yet to set out a plan. Clearly, as it seems from the article, the UK will need to up its game if it is not to lose the possibility of investment into its semiconductor sector from companies like Intel – in this context, the article quotes Frans Scheper, Intel’s new president in Europe, as saying that the UK has strong expertise in the design of microchips, mainly clustered around universities, “which is very exciting, and a lot of capital comes out of London, which is important for growing start-ups. But, because of the investment [supported by the EU], our focus is very much on the EU”.

All is not, however, doom and gloom on the UK semiconductor scene because, for instance, the same edition of The Times on 9th August 2022 reported that ARM, the Cambridge-based microchip designer (owned by Software of Japan) behind the hardware integral to many Apple, Qualcomm and Samsung devices, shipped 7.4 billion chips in the first quarter of 2022, a 7 per cent increase on the same period in 2021.

A less positive news story was, however, published by The Times on 10th August 2022 under the heading, “Supply issues drive down used car sales”. This article reported that a number of used cars sold in the UK had fallen by nearly a fifth in the second quarter of 2022 “as the supply issues that have put the brakes on the new car market finally hit the availability of second-hand vehicles”. According to The Times, the UK’s Society of Motor Manufacturers and Traders has commented that the long-running shortage of semiconductors, which has continued to affect the supply of new cars, has had an “inevitable” knock-on effect on used car transactions (with consumers holding on to their vehicles for longer, resulting in fewer used car transactions).

Clearly, there are challenges ahead for the UK in the highly competitive semiconductor sector but there presumably should be no reason why the UK should not be in a strong position to compete.

Brexit and France

On 19th August 2022, the UK’s Department for International Trade (DIT) published a factsheet on UK-France trade and investment, which showed that total trade in goods and services (exports plus imports) between the UK and France was £70.8 billion in the four quarters to the end of Q1 (Quarter 1) 2022, an increase of 11.8% or £7.5 billion from the four quarters to the end of Q1 2021. Of this £70.8 billion:

  • Total UK exports to France amounted to £33.3 billion in the four quarters to the end of Q1 2022 (an increase of 11.8% or £3.5 billion compared to the four quarters to the end of Q1 2021); and
  • Total UK imports from France amounted to £37.4 billion in the four quarters to the end of Q1 2022 (an increase of 11.9% or £4.0 billion compared to the four quarters to the end of Q1 2021).

According to the factsheet, France was the UK’s 5th largest trading partner in the four quarters to the end of Q1 2022 accounting for 5.2% of total UK trade.

In 2020, the outward stock of foreign direct investment (FDI) from the UK in France was £85.5 billion accounting for 5.2% of the total UK outward FDI stock and the inward stock of FDI in the UK from France was £69.1 billion accounting for 3.6% of the total UK inward FDI stock.

It appears from these figures that, even making allowances for Brexit and Covid-19, trade and investment between the UK and France is on something of an upward trend – which is surely a good sign!

Brexit and unregulated buy-now pay later (BNPL) products

On 19th August 2022, the UK’s Financial Conduct Authority (FCA) published a “Dear CEO” letter requiring firms to review their financial promotions for unregulated BNPL products and also published a letter to the British Retail Consortium on the same subject matter asking the Consortium to share its contents with their members.

The “Dear CEO “ letter is directed at all firms (whether FCA-authorised or not) carrying out the activity of entering into BNPL agreements with consumers, as well as merchants (whether FCA-authorised or not) that introduce customers to firms for the purpose of entering into a BNPL agreement in order to fund a purchase of goods or services from them as well as authorised firms approving financial promotions of BNPL agreements, including social media influencers.

The “Dear CEO “ letter, which is written on behalf of the FCA by Sheldon Mills, Executive Director, Consumers and Competition, states the FCA’s concerns in the following terms:

“We have seen financial promotions on websites and social media, including posts by social media influencers, which may breach the requirements set out in CONC 3 [section 3 of the Consumer Credit sourcebook in the FCA handbook] by failing to be balanced. The benefits of BNPL products have been emphasised without fair and prominent indications of any relevant risks to customers, which may include:

  • the risk of taking on debt that customers cannot afford to repay
  • the consequences of missed payments
  • information about when charges become payable.

Taking advantage of behavioural biases also hinders effective consumer decision making, and we are concerned BNPL promotions may be encouraging impulse buying.”

The work of the FCA continues, Brexit or no Brexit, and clearly consumer protection is a chief priority.